British International Investment (BII), UK’s development finance institution will invest up to Rs 1,925 crore or $250 million each into a wholly owned subsidiary of M&M, EV Co., which will be newly incorporated.
Post the capital infusion in EV Co., BII would hold a 2.75%-4.76% stake in the subsidiary.
Based on BII’s investment of $250 million, EV Co.’s valuation is around $5.9-9.1 billion, according to analysts at Motilal Oswal Financial Services. “It implies a gross value for M&M shareholders at Rs360-569/share,” said Motilal Oswal analysts in a report on 7 July.
Shares of Mahindra & Mahindra Ltd (M&M) rose by 5.4% in early trade on Friday on NSE taking the stock to a new 52-week high of Rs 1,194.90 apiece.
This transaction does not include electric vehicle segments such as three-wheelers and light commercial vehicles. EV Co. would focus on electric passenger vehicles in the four-wheeler (4W) segment. The assets of M&M’s 4W passenger vehicle electric business would be transferred to EV Co.
Over FY24-27, the total capital infusion is expected to be around Rs8000 crore or $1 billion. The utilization of the funds will be directed towards creating an electric SUV portfolio with advanced technologies, said the company.
As such, M&M expects the proportion of electric sports utility vehicles (SUV) in its SUV portfolio to reach 20%-30% by 2027. It is likely to reveal the electric XUV 400 in September.
“Net value accretion to M&M shareholders will depend on its ability to leverage the electrification trend and expand its market share in the SUV segment. Currently, we are not valuing the EV business separately as it doesn’t have any material presence in the electric PV segment,” added the Motilal Oswal report.
